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Reliance’s stalled BWA plans
With the government due to unveil the National Broadband plan, Reliance
Industries’ choice of technology for broadband wireless access (BWA) is
still under wraps and no tower/infrastructure-sharing deal has yet been
announced. We believe that, besides the technology dilemma, affordable
handsets remain a critical factor. Further, Reliance needs a unified access
services licence (UASL) to provide voice services alongside data. In the
midst of the 2G spectrum scam, a new UASL will be difficult for the
government to issue. With Reliance’s stalled BWA plan, Bharti Airtel looks
better positioned for the 3G opportunity.
Reliance Industries stalled BWA plans
In 2010, BWA raised Rs387bn (US$8.4bn) for the government when two pan-
India spectrum blocks (22 circles) of 20MHz, each in the 2.3GHz band, were
auctioned and US$2.8bn was paid by public-sector BSNL/MTNL. Subsequently
Reliance Industries (RIL IB - Rs981.5 - O-PF) purchased a 95% stake in the
only pan-India BWA spectrum winner Infotel. BWA licences are technologyneutral
and both WiMax and LTE can be on the same spectrum however these
licences allow only data services. To provides voice services, Reliance
Industries will require a UASL which currently also entitles a
minimum 4.4MHz of 2G spectrum for a fee of Rs16.5bn/US$366m. In
the midst of the 2G spectrum scam, a new UASL will be difficult for
the government to issue.
Dilemma over choice of technology and handsets
Besides the need for a UASL, BWA rollouts also face the dilemma over the
choice of technology. The choice is adoption of Wimax or LTE or both. LTE is
still in the trial phase and large-scale adoption will take time. Besides, the
handsets/terminal equipment is a significant issue. LTE handsets irrespective
of urban or rural rollout will require subsidies while dongles are already
available across CDMA 1X and now also 3G mobile networks and tariffs are
already competitive. Availability and price of LTE devices will be critical in
determining the rollout of services as well as the adoption and therefore the
BWA opportunity.
Infrastructure requirements for BWA
Considering that Reliance’s BWA rollouts will not be an overlay to the 2G and
2.5G networks, the infrastructure requirements will be significant. As per
industry BWA will require more towers (500 subscribers versus >1,000 for
GSM per site) and while Reliance can share towers with any of the six tower
companies in India no deal has been announced yet. Besides, BWA also
requires robust/broad pipe backhaul. We believe it is way too early for LTE in
India and for 4G data revenue opportunity to be comparable with 2-2.5G and
even the upcoming 3G mobile and data opportunity.
National broadband plans will be missed
India’s low 1% broadband penetration is an exciting opportunity, especially as
the 700 million mobile-subscriber base far exceeds the country’s stagnant
fixed-line base of 36 million. The government in the coming weeks will outline
the new national broadband plan to connect 160 million homes by 2014 but
this is ambitions with stalled BWA rollouts. Reliance too had outlined the India
broadband opportunity at 100 million subscribers and US$6-7bn revenue by
2014 and targeted cash breakeven in three years of service rollout. Our
Reliance analyst Somshankar Sinha values the Rs24.5bn equity invested for
the BWA foray through Infotel at 1x PB. Meanwhile, Bharti Airtel is better
positioned for 3G mobile and data opportunity.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance’s stalled BWA plans
With the government due to unveil the National Broadband plan, Reliance
Industries’ choice of technology for broadband wireless access (BWA) is
still under wraps and no tower/infrastructure-sharing deal has yet been
announced. We believe that, besides the technology dilemma, affordable
handsets remain a critical factor. Further, Reliance needs a unified access
services licence (UASL) to provide voice services alongside data. In the
midst of the 2G spectrum scam, a new UASL will be difficult for the
government to issue. With Reliance’s stalled BWA plan, Bharti Airtel looks
better positioned for the 3G opportunity.
Reliance Industries stalled BWA plans
In 2010, BWA raised Rs387bn (US$8.4bn) for the government when two pan-
India spectrum blocks (22 circles) of 20MHz, each in the 2.3GHz band, were
auctioned and US$2.8bn was paid by public-sector BSNL/MTNL. Subsequently
Reliance Industries (RIL IB - Rs981.5 - O-PF) purchased a 95% stake in the
only pan-India BWA spectrum winner Infotel. BWA licences are technologyneutral
and both WiMax and LTE can be on the same spectrum however these
licences allow only data services. To provides voice services, Reliance
Industries will require a UASL which currently also entitles a
minimum 4.4MHz of 2G spectrum for a fee of Rs16.5bn/US$366m. In
the midst of the 2G spectrum scam, a new UASL will be difficult for
the government to issue.
Dilemma over choice of technology and handsets
Besides the need for a UASL, BWA rollouts also face the dilemma over the
choice of technology. The choice is adoption of Wimax or LTE or both. LTE is
still in the trial phase and large-scale adoption will take time. Besides, the
handsets/terminal equipment is a significant issue. LTE handsets irrespective
of urban or rural rollout will require subsidies while dongles are already
available across CDMA 1X and now also 3G mobile networks and tariffs are
already competitive. Availability and price of LTE devices will be critical in
determining the rollout of services as well as the adoption and therefore the
BWA opportunity.
Considering that Reliance’s BWA rollouts will not be an overlay to the 2G and
2.5G networks, the infrastructure requirements will be significant. As per
industry BWA will require more towers (500 subscribers versus >1,000 for
GSM per site) and while Reliance can share towers with any of the six tower
companies in India no deal has been announced yet. Besides, BWA also
requires robust/broad pipe backhaul. We believe it is way too early for LTE in
India and for 4G data revenue opportunity to be comparable with 2-2.5G and
even the upcoming 3G mobile and data opportunity.
National broadband plans will be missed
India’s low 1% broadband penetration is an exciting opportunity, especially as
the 700 million mobile-subscriber base far exceeds the country’s stagnant
fixed-line base of 36 million. The government in the coming weeks will outline
the new national broadband plan to connect 160 million homes by 2014 but
this is ambitions with stalled BWA rollouts. Reliance too had outlined the India
broadband opportunity at 100 million subscribers and US$6-7bn revenue by
2014 and targeted cash breakeven in three years of service rollout. Our
Reliance analyst Somshankar Sinha values the Rs24.5bn equity invested for
the BWA foray through Infotel at 1x PB. Meanwhile, Bharti Airtel is better
positioned for 3G mobile and data opportunity.
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